Working from home has become increasingly common, and if you’re self-employed or a small business owner, you may be eligible for the home office deduction—a tax break that can save you hundreds or even thousands of dollars each year.
However, the IRS has strict rules about who qualifies and how to claim this deduction. Below, we break down the eligibility requirements, calculation methods, and key documentation you need to legally write off your home office.
Who Qualifies for the Home Office Deduction?
According to the IRS, you can claim the home office deduction if:
- Exclusive & Regular Use—You must use the space regularly and exclusively for business. A guest bedroom doubling as an office won’t qualify unless it’s strictly used for work.
- Principal Place of Business – Your home office must be either:
- Your principal place of business, or
- A space where you meet clients/customers regularly.
Notes:Additional restrictions apply if you’re a W-2 employee (not self-employed). The Tax Cuts and Jobs Act (TCJA) suspended this deduction for W-2 employees through 2025, but self-employed individuals and independent contractors can still claim it.
Two Ways to Calculate Your Deduction
The IRS allows two methods for calculating your home office deduction:
1. Simplified Method
- Best for those who want an easy, no-hassle approach.
- No need to track actual expenses—just measure your office space.
- Multiply the designated home office square footage (up to 300 sq. ft.) by the standard rate of $5 per square foot.
2. Actual Expenses Method
- Deduct a percentage of your home-related costs (mortgage interest, rent, utilities, insurance, repairs, etc.) based on office size.
- Example: If your home is 2,000 sq. ft. and your office is 200 sq. ft. (10%), you can deduct 10% of eligible expenses.
- Bonus: You can also deduct depreciation on your home (but this may affect capital gains taxes when you sell).
What Expenses Can You Deduct?
If using the actual expenses method, you can write off:
- Mortgage interest or rent
- Utilities (electricity, internet, water)
- Homeowners insurance
- Repairs & maintenance (for the office area only)
- Depreciation (if you own your home)
Note: Personal expenses like lawn care or whole-house renovations don’t qualify.
Common Mistakes to Avoid
- Claiming a non-exclusive space – The IRS may deny your deduction if your “office” is also a dining room.
- Overestimating square footage – Only count the area used solely for your business.
- Failing to keep records – Save receipts, utility bills, and a workspace diagram in case of an audit.
Special Cases & Additional Deductions
- Daycare Providers – Different rules apply if you run a licensed daycare at home.
- Storage for Inventory – If you sell products, you may deduct space used for storage.
- Freelancers & Gig Workers – Uber drivers, bloggers, and consultants can qualify if they meet IRS criteria.
Final Thoughts
The home office deduction can be a valuable tax break, but it’s important to follow IRS rules carefully. If you’re unsure whether you qualify, consult a tax professional to maximize your savings legally.
Need help with your home business taxes? Schedule a free consultation with a tax expert today!
